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Kinston Industries is considering investing in a machine that will cost $245,000 and will last...

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Kinston Industries is considering investing in a machine that will cost $245,000 and will last for three years. Assume that Kinston's new machine will be depreciated straight line to a salvage value of $5,000 at the end of year three. The machine will generate revenues of $180,000 each year and the cost of goods sold will be 50% of sales. Fixed cost is $25000. At the end of year three the machine will be sold for $15,000. The appropriate cost of capital is 12% and Kinston is in the 32% tax bracket. A five-year project costing 500000, is expected to generate annual revenues of $160,000, variable costs of $72,000, and fixed costs of $15,000. The depreciation is straight-line with no salvage value and the tax rate is 21 percent. What is the annual operating cash flow? Edit Vio

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